Speed Crucial In Fighting Recession
The Age
Saturday December 13, 2008
THIS is classic recession-busting stuff. In sheer bang for buck, it should be better value than this week's hand-outs to families and pensioners, better even than the Reserve Bank's interest rate cuts.
Why? Because this money will get spent, quickly, as a one-off stimulus, on things that will make Australia work more efficiently.As Reserve Bank governor Glenn Stevens notes, our problem is that banks, business and households lack confidence - and there is nothing that Government can do to change that while we are heading down.What government does best is to provide the spending to keep the economy going when consumers, investors and lenders pull back. And as Treasury argues, that spending should come early, be temporary, and be targeted to maximise the lift in output.Almost all these programs do that. The rail and road infrastructure projects had been planned, and most were already in the pipeline. Now they can be built more rapidly. That will provide a long-term boost to the economy, particularly if fixing the north-south rail line gets some of those inefficient, dangerous trucks off the Hume.Universities and TAFE colleges have been starved of capital investment for decades. The benefit of their new research facilities may be less obvious than for roads and rail, but in time could be far greater.The one question mark is over the 10per cent investment allowance for new business investment before mid-2010. Yes, business investment is a good thing, but the vast bulk of this money will subsidise investment that would have happened anyway. And as most plant and equipment is imported, maybe half the stimulus will end up overseas.In the last recession, the Hawke government watched for so long that by the time Labor finally delivered its stimulus, the recession was over. The speed of the Rudd Government's stimulus is impressive.
© 2008 The Age